Generics in the spotlight in EU probe

Europe’s generic drug industry says it is ready provide the European Commission’s new investigation into possible anticompetitive practices in the pharmaceutical market with “a detailed overview on current barriers to competition from generic medicines.”

The European Union investigation was announced by Competition Commissioner Neelie Kroes on Wednesday, hours after Commission investigators conducted unprecedented dawn raids on the offices of many leading innovative and generic drugmakers. The probe aims to discover why the number of new medicines arriving on the market in the EU has been declining, and why the market entry of generic alternatives “sometimes seems to be delayed.”

Observers believe that it is the latter area which will provide the main focus for investigators, as they seek to prime the Commission to be able to take the kind of action regularly undertaken by officials in the US against anticompetitive deals which seek to keep generics off the market for as long as possible.

While intellectual property rights have increased in the EU over the past 15 years, this has not resulted in an increased rate of innovation because the current intellectual property and pricing systems are not stimulating innovation nor encouraging competition from generics, according to the European Generic Medicines Association. A current weakness in the EU patent system allows the granting of weak patents which subsequently cause “evergreening” of pharmaceutical blockbusters and, in some cases, creates unclear patent situations for certain molecules, says the EGA, which adds that the launch of generics is sometimes blocked due to unjustified litigation based on weak evidence.

“The EGA is of the opinion that Europe needs strong patent legislation with strong criteria on what is an ‘inventive step,” guaranteeing that patents are granted in order to reward genuine innovation, says the Association.

Generics under scrutinyHowever, the EU generics industry can also expect to come under tough scrutiny; the Commission has said its inquiry will pay particular attention to whether agreements between drugmakers such as patent dispute settlements could infringe the EC Treaty’s prohibition on restrictive business practices.

The EU investigators are reported to working with antitrust officials in the US, and Commissioner Kroes said they will also be in close contact with colleagues in the Commission’s internal market services, which are headed by Charlie McCreevy.

The first drugmakers to have acknowledged receiving visits from the EU investigators on Wednesday included GlaxoSmithKline, AstraZeneca, Sanofi-Aventis, Pfizer, Wyeth and Teva, and since then others including Merck & Co’s European unit Merck Sharp & Dohme, Johnson & Johnson's Belgian unit, Novartis’ Sandoz arm and Bayer Schering Pharma have also said that they have been contacted and are cooperating with the officials.

Others such as Belgian group UCB, Solvay and Dutch biotechnology group Pharming said they had not been contacted by investigators.

- A Commission “sector inquiry” is primarily an information-gathering and analysis exercise to provide in-depth knowledge about markets, say EU sources, which add that such an inquiry ”is therefore upstream of any antitrust proceedings in specific cases, which may or may not follow.”